The U.S. House of Representatives has passed H.J. Res 25, effectively rejecting the Internal Revenue Service’s (IRS) controversial broker rule.

The resolution, which gained overwhelming bipartisan support, aims to protect decentralized finance (DeFi) innovation and prevent regulatory overreach.

Taxing Requirement

According to the DeFi Education Fund, 292 lawmakers voted in favor of the resolution while 132 went against it, nullifying a rule that would have imposed strict reporting requirements on DeFi platforms. The 292 included all House Republicans, apart from a few that didn’t show up, as well as 76 Democrats.

The advocacy group praised the move, saying in a statement posted on X:

“The DeFi Education Fund applauds all members who voted in favor of the resolution, reaffirming that Americans should have the freedom to decide how they transact.”

Pushed by the U.S. Treasury and the IRS, the contentious rule sought to improve tax compliance by treating DeFi platforms and software providers like traditional brokers, subjecting them to stringent reporting obligations. However, critics argued that it ignored the unique nature of decentralized technology and would have placed undue compliance burdens on developers who never take custody of users’ assets.

In December last year, Andreessen Horowitz joined a legal challenge against the regulation, claiming that it exceeded the IRS’s statutory authority and threatened the growth of the crypto industry in the U.S.

Following the passing of the joint resolution, French Hill, who chairs the House Financial Services Committee, stated that the broker rule is “a clear example of government overreach” that could push American digital asset development offshore. He also reaffirmed his commitment to working across party lines to create clearer, more appropriate regulatory frameworks for crypto.

According to Fox Business reporter Eleanor Terrett, H.J. Res 25 will now move back to the Senate due to a technicality requiring “bills that affect the budget to originate in the House.” Senators, who voted in favor of a similar resolution 70 to 27 earlier in the month, must pass it before it heads to the president for final approval. If signed into law, it will officially overturn the IRS rule and prevent it from coming back in a similar form.

Market Reaction

Despite the development, at the time of writing, the broader crypto market was down 0.7% in the last 24 hours. However, some high-cap assets including Bitcoin (BTC), XRP, and Dogecoin (DOGE), were showing signs of recovery. BTC was up 1.1% on its price from yesterday, while XRP and DOGE recorded even better improvements at 3.1% and 3.4%, respectively.

In the past week, data from CoinGecko shows that the digital asset sector lost nearly 10% of its value as it battled a period of enhanced volatility. In that time, Bitcoin dropped to a four-month low, dipping under the $77,000 level, while its closest rival, Ethereum (ETH), slipped below $1,800 for the first time in nearly 16 months.